The dollar dropped to the upper 109 yen zone despite BOJ Governor Haruhiko Kuroda pledging support to stem yen gains.
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At the same time, the United States has warned Japan against intervening in the currency market, a la China (China recently depreciated its currency to cope with falling exports).
It was the the third trade surplus recorded in a row, the longest consecutive stretch since late 2010, and was well ahead of forecasts for a narrowing to 492.8 billion yen.
“The other factor is strong USA housing data and comments coming out of the US that have increased confidence that there could be a June rate-hike”. “Still, the data was enough to trigger yen buying”, Masashi Murata of Tokyo-based Brown Brothers Harriman said. Japan notched a trade surplus for the third straight month.
While Aso said his G7 counterparts reaffirmed the importance of exchange-rate stability, Japan received no public endorsements from other G7 members for intervention to contain “one-sided” yen rises.
The greenback was down 0.5 percent at 109.720 yen, pulling back from a three-week high of 110.59 scaled on Friday. However, the broad-ranging S&P 500 index in Chicago bucked the trend, opening up higher by just over half a per cent a short time ago.
The US currency got off to a steady start to the week against other major peers, with the dollar index remaining within striking distance of a two-month peak after markets last week moved to price in a greater chance of an imminent hike in US interest rates.
Gold skidded 1.7% last week, marking its biggest weekly decline in two months.
KEEPING SCORE: In early trading, France’s CAC-40 index edged 0.1 percent higher to 4,356.61 and Germany’s DAX rose 0.5 percent to 9,966.99. Toyota Motor Corp climbed 2 percent while Honda Motor Co Ltd shares rose 2.5 percent and Nissan Motor Co Ltd gained 1.1 percent.
But overall, the dollar was bolstered by growing bets that the U.S. Federal Reserve was gearing up to raise interest rates sooner than some investors had expected.
“While markets may be flat for now, the saying goes ‘never short a tiresome market, ‘” Chris Weston, chief market strategist, IG Markets in Melbourne, said in a note to clients.
Exports to the US fell 11.8 percent in April from a year earlier, while shipments to the European Union rose 9.9 percent. Fed branch presidents including those from San Francisco, St. Louis, Dallas, Minneapolis are also slated to speak earlier in the week.
The dollar erased most of its earlier gains against the euro, which last traded roughly flat at $1.1217 after hitting a session low of $1.1187.
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The dollar will be in focus this week in the build-up to the much-anticipated June Fed meeting.
